NEW YORK (AP) — Group of Jefferies & Co. analysts said Friday that shares of big pharmaceutical companies should continue to do better than the broader market as investors worry about national debts and slower growth.
The analysts said Pfizer Inc. is their top pick in the sector because the company is making encouraging progress with some of its experimental drugs, and it could raise a significant amount of money by selling or spinning off its nutrition and animal health businesses. Their other top picks were GlaxoSmithKline PLC and Roche Holding AG. The analysts said they have a more cautious position on German drugmakers Merck KGaA and Bayer.
"Whilst markets continue to remain nervous of the potential European sovereign debt problems, be they Greek, Italian, Spanish or from elsewhere, the pharmaceutical sector will likely remain a relatively secure, safe haven for investors in the interim," the analysts wrote.
Analysts Jeffrey Holford, Ian Hilliker, and James Dodwell said Roche stock could get a boost from data due out next week at a breast cancer conference, while the upcoming American Society of Hematology conference could bring bullish news for Abbott Laboratories Inc., Bristol-Myers Squibb Co., and Novartis AG.
They added that the failure of the Congressional deficit committee created "a huge positive for the sector." The committee members had looked at cutting spending on patients who are on both Medicare and Medicaid because those members — called "dual eligibles" — are responsible for an outsize portion of Medicare and Medicaid costs. The committee was unable to strike a deal, so there were no cuts to dual eligible spending. Instead, a 2 percent cut in overall Medicare funding its set to kick in in 2013.
The analysts said a cut to dual eligible funding would have hurt Roche, Eli Lilly and Co., Sanofi, and Novo Nordisk AS.
In Friday trading, Pfizer's shares fell 14 cents to $19.89. American depositary shares of GlaxoSmithKline lost 12 cents to $44.18 and Abbott Laboratories' stock gave up 37 cents to $54.15. Bristol-Myers Squibb shares declined 13 cents to $32.77 and Novo Nordisk A/S gained $1.56 to $112.46.